Soliman vs. Santos

An administrative rule that creates a blanket exemption not found in the enabling statute is void for exceeding the scope of delegated legislative authority; however, the 20% senior citizen discount under Section 4(a), RA 9994 applies only to the sale of goods and services, and membership dues in non-profit clubs are not subject to the discount because they do not involve a sale of service, while fees for facility use and equipment rental are.

Respondent Carlos T. Santos, Jr. is a regular member of petitioner The Manila Southwoods Golf and Country Club, Inc., a non-profit, stock golf and country club not open to the general public. Petitioner Hon. Corazon J. Soliman, as Secretary of the Department of Social Welfare and Development (DSWD), formulated the Implementing Rules and Regulations of Republic Act No. 9994, the Expanded Senior Citizens Act of 2010, which mandates a 20% discount for senior citizens on the utilization of services in recreation centers. The DSWD's IRR contained a provision exempting non-profit, stock golf and country clubs from the obligation to grant the 20% discount, setting the stage for the dispute over whether such an exemption could validly be created by administrative regulation.

Respondent Carlos T. Santos, Jr. is a regular member of petitioner The Manila Southwoods Golf and Country Club, Inc., a non-profit, stock golf and country club that is not open to the general public. Citing the law on senior citizens' benefits, Santos formally requested that Manila Southwoods apply the 20% senior citizen discount on his monthly dues, locker rentals, and other fees and charges pertaining to his use of the club's golf facilities and equipment. Manila Southwoods refused, invoking paragraph 2, Section 4, Article 7, Rule IV of the IRR of RA 9994, which provides that non-profit, stock golf and country clubs not open to the general public are not mandated to give the 20% senior citizen discount.

Santos then filed a complaint before the RTC of Quezon City to invalidate the assailed IRR provision, impleading both Manila Southwoods and the DSWD, the latter being the agency that formulated the IRR. During the pre-trial conference, the parties manifested that the only issue was purely legal and that there was no need to go to trial; the case was deemed submitted for decision upon the submission of the parties' respective memoranda. The RTC rendered its decision on 15 June 2012, declaring the assailed IRR provision invalid and ordering Manila Southwoods to grant Santos the 20% discount on the use of its recreation center services. The RTC found that the language of RA 9994 was clear, plain, and unequivocal, and that the IRR provision created a distinction not found in the law, effectively amending the statute by mere regulation. The RTC denied Manila Southwoods' motion for reconsideration on 30 July 2012.

Both the DSWD and Manila Southwoods filed separate petitions for review on certiorari before the Supreme Court under Rule 45, raising pure questions of law. The Court consolidated the two petitions in a Resolution dated 7 August 2013, as they involved the same parties, issues, and set of facts. The central question before the Court was whether the assailed IRR provision was valid and, consequently, whether non-profit, stock golf and country clubs were mandated to grant the 20% senior citizen discount to their senior members on their monthly dues, locker rentals, and other charges.

• Validity of the IRR Provision (DSWD): The DSWD argued that the assailed IRR provision was crafted to fill in the details of the broad policies contained in RA 9994 and is valid because it is germane to the objects and purposes of the law and in conformity with the standards prescribed by the law. The DSWD maintained that the benefits from exclusive non-profit, stock golf and country clubs are neither basic nor essential nor do they redound to the benefit of the general public, as such clubs exclusively cater to a closed membership of privileged and affluent individuals.
• Delegated Authority and Public Nature (DSWD): The DSWD contended that a regulation need not be expressly stated in the statute to be valid; it suffices that it is germane to the law's purposes and conforms to its standards. It argued that the public nature of the commercial establishment is the key element in the application of the 20% discount, and that RA 9257 and its implementing rules already excluded establishments not offering goods and services to the general public.
• Political Question (DSWD): The DSWD argued that the decision to exclude non-profit, stock golf and country clubs is a policy decision within the domain of the political branches of government and outside the range of judicial cognizance.
• Scope of "Recreation Centers" (Manila Southwoods): Manila Southwoods argued that the assailed IRR provision is consistent with RA 9994 and therefore valid, and that non-profit, stock golf and country clubs are not "recreation centers" under RA 9994 such that it is not mandated to extend the 20% discount to its senior citizen members.
• Membership Dues Not Covered (Manila Southwoods): Manila Southwoods contended that even if such clubs are considered recreation centers, the 20% discount is limited to the sale of goods and services and does not include membership dues, which cover the cost of operating and maintaining the club and its facilities and are not payment for goods or services rendered. It argued that if senior members are granted discounts on membership dues, the cost would be passed on to non-senior members.
• Social Legislation Purpose (Manila Southwoods): Manila Southwoods claimed that RA 9994, as social legislation, is intended to benefit underprivileged senior citizens by making essential goods and services affordable to them, and that since Santos failed to establish the invalidity of the assailed provision clearly and unmistakably, the RTC should have upheld its validity.

• Plain Language of the Law: Santos argued that the exemption created by the assailed IRR provision is without legal basis and cannot be justified by legislative intent. If Congress intended to limit the coverage of RA 9994 to underprivileged senior citizens, basic goods and services, and establishments offering services to the public, it would have stated so in express terms.
• No Distinction in the Law: Santos maintained that the language of RA 9994 is plain and unequivocal that all establishments are mandated to give discounts to senior citizens, without distinction as to whether the senior citizens are indigent or underprivileged, and that the law covers "all establishments" insofar as the enumerated goods and services are concerned.
• No Delegated Authority to Create Exemptions: Santos stressed that while other benefits under RA 9994 are expressly made subject to interpretation by designated government agencies, no such qualifier exists for the 20% discount in recreation centers. The DSWD is authorized to issue implementing rules but the assailed provision does not carry out the law's objectives as it creates an exemption not found in the statute.
• Membership Dues as Services: Santos argued that the phrase "utilization of services" in Section 4(a)(7) is broad enough to cover membership dues, and to contend otherwise is to engage in semantic quibbling. He also disputed as factual matters the claims that Manila Southwoods is a non-profit, stock corporation exclusive to its members and not open to the public, noting these were not stipulated upon and the burden of proof was on Manila Southwoods.

• Validity of the IRR Provision: Whether paragraph 2, Section 4, Article 7, Rule IV of the IRR of RA 9994, exempting non-profit, stock golf and country clubs from the 20% senior citizen discount, is valid.
• Scope of the 20% Discount — Membership Dues: Whether membership dues in non-profit, stock golf and country clubs constitute the "sale of services" under Section 4(a), RA 9994, such that they are subject to the 20% senior citizen discount.
• Scope of the 20% Discount — Facility Use Fees: Whether fees for locker rentals and other charges pertaining to the use of golf facilities and equipment constitute the "sale of services" under Section 4(a)(7), RA 9994, such that they are subject to the 20% senior citizen discount.

• Validity of the IRR Provision: No. The assailed IRR provision is invalid for exceeding the DSWD's delegated rule-making authority, as RA 9994 contains no exemption for non-profit, stock golf and country clubs and does not authorize the DSWD to create such blanket exemptions.
• Scope of the 20% Discount — Membership Dues: No. Membership dues are not subject to the 20% senior citizen discount because they are paid for the privilege of membership and do not involve the sale of a good or service as required by Section 4(a), RA 9994.
• Scope of the 20% Discount — Facility Use Fees: Yes. Fees for locker rentals and other charges pertaining to the use of golf facilities and equipment involve the sale of services under Section 4(a)(7), RA 9994, and golf and country clubs are required to provide qualified members with the 20% discount.

• Validity of the IRR Provision: Administrative rules and regulations must conform to the terms and standards prescribed by the law, carry the law's general policies into effect, and must not contravene the Constitution and other laws. The requisites for a valid administrative issuance are: (1) its promulgation must be authorized by the legislature; (2) it must be promulgated in accordance with the prescribed procedure; (3) it must be within the scope of the authority given by the legislature; and (4) it must be reasonable. Being the product of delegated legislative power, such rules may not exceed the scope of statutory authority granted. Section 4(a), RA 9994, provides a 20% discount on the sale of enumerated goods and services from all establishments, without any proviso allowing the DSWD to carve out wholesale exceptions. Section 4(a)(7) applies the discount to the utilization of services in recreation centers and does not allow the DSWD to exempt entire classes of recreation centers. The plain language of the law does not prescribe a sweeping exemption for non-profit, stock golf and country clubs, nor does it authorize the DSWD to create such exemptions. The contemporaneous construction of the DSWD was disregarded because the law is clear and unambiguous, and the construction was clearly erroneous. The argument that RA 9994 should be limited to basic goods and services for underprivileged senior citizens was rejected, as the Constitution considered the elderly as a class of their own without reservation as to income, and the law expressly applies the discount to non-basic goods and services such as concert halls, circuses, massage parlors, spas, and fine dining restaurants. Social legislation must be liberally construed in favor of the beneficiaries.

• Scope of the 20% Discount — Membership Dues: Section 4(a), RA 9994, expressly applies the 20% discount to "the sale of the [enumerated] goods and services." The plain language thus requires the sale of a good or service for the discount to apply. In Association of Non-Profit Clubs, Inc. vs. Bureau of Internal Revenue, the Court held that membership fees, assessment dues, and the like are not subject to VAT because the club is not selling its service to the members and the members are not buying services from the club; the dues are devoted to the operations and maintenance of the facilities. This ruling was reiterated in Commissioner of Internal Revenue vs. Federation of Golf Clubs of the Philippines, Inc. Applying the doctrine of in pari materia, the Court's reasoning on the nature of membership dues for VAT purposes applies with equal force to the 20% senior citizen discount. Membership dues are paid for the privilege of membership, not for the purchase of a good or service. To rule otherwise — that membership dues involve a sale of service for purposes of the senior citizen discount but not for VAT liability — would defy logic. The requirement of a sale of goods and services in Section 4(a) may not be ignored by limiting analysis to Section 4(a)(7), as every part of the statute must be considered together, and no provision may be rendered surplusage.

• Scope of the 20% Discount — Facility Use Fees: In contrast to membership dues, the payment of fees for locker rentals and other charges pertaining to the use of golf facilities and equipment involves the sale by the golf and country club of services to the availing member. In paying these fees, the purchasing member is availing of the club's services and not merely paying for the privilege of membership. There is thus a sale of service as contemplated in Section 4(a)(7), and golf and country clubs are required to provide qualified members with the 20% discount mandated by RA 9994. This distinction between membership dues and fees for rendered services ensures that the treatment of these fees under RA 9994 is consistent with their treatment under the Tax Code.

• Validity of Administrative Rules and Regulations — An administrative issuance must comply with four requisites to be valid: (1) its promulgation must be authorized by the legislature; (2) it must be promulgated in accordance with the prescribed procedure; (3) it must be within the scope of the authority given by the legislature; and (4) it must be reasonable. Being the product of delegated legislative power, administrative rules may not exceed the scope of the statutory authority granted by the legislature. The regulation must be germane to the objects and purposes of the law and in conformity with the standards prescribed by law. In case of conflict between a statute and an administrative order, the former prevails. The Court applied this doctrine by finding that the DSWD exceeded its delegated authority when it created a blanket exemption for non-profit, stock golf and country clubs, as RA 9994 contains no such exemption and does not authorize the DSWD to create one.

• Contemporaneous Construction — The Court may disregard contemporaneous construction of an administrative agency where the law construed possesses no ambiguity, where the construction is clearly erroneous, where strong reason to the contrary exists, or where the court has previously given the statute a different interpretation. The Court applied this principle by disregarding the DSWD's construction of RA 9994, as the law's language was clear and the DSWD's construction was clearly erroneous in creating exemptions not found in the statute.

• Liberal Construction of Social Legislation — The inflexible rule is that social legislation must be liberally construed in favor of the beneficiaries, with all doubts resolved in favor of the retiree or beneficiary to achieve the humanitarian purposes of the law. The Court relied on this doctrine to reject the argument that RA 9994 should be limited to basic goods and services for underprivileged senior citizens.

• Nature of Membership Dues — Membership fees, assessment dues, and the like do not involve the sale of a good or service, as the club is not selling its service to the members and the members are not buying services from the club; the dues are devoted to the operations and maintenance of the facilities. The Court applied this doctrine, originally articulated in the context of VAT liability, to the 20% senior citizen discount under RA 9994 by virtue of the principle of in pari materia, holding that membership dues are not subject to the discount while fees for facility use and equipment rental are.

• Statutory Construction — In Pari Materia — If diverse statutes relate to the same thing, they ought to be taken into consideration in construing any one of them, as all acts in pari materia are to be taken together as if they were one law. The Court used this principle to harmonize the treatment of membership dues under the Tax Code (for VAT purposes) and under RA 9994 (for the senior citizen discount), ensuring a uniform system of jurisprudence.

• "the plain language of RA 9994 does not prescribe a sweeping and unconditional exemption on all fees that may be charged by non-profit, stock golf and country clubs, nor does it allow the DSWD to create such exemptions." — This passage articulates the core ratio decidendi: the DSWD exceeded its delegated authority by creating a blanket exemption not contemplated by the enabling statute.

• "To recognize all senior citizens as a group, without distinction as to income, is a valid classification." — This quotation, adopted from Southern Luzon Drug Corporation vs. DSWD, defines the constitutional basis for treating senior citizens as a class entitled to benefits without regard to income, rejecting the argument that the discount should be limited to underprivileged elderly.

• "membership fees, assessment dues, and the like are not subject to VAT because in collecting such fees, the club is not selling its service to the members. Conversely, the members are not buying services from the club when dues are paid" — This passage from Association of Non-Profit Clubs, Inc. vs. BIR, adopted by the Court, establishes the essential distinction between membership dues and fees for services that controls the application of the 20% senior citizen discount.

• "the payment of membership dues does not involve the sale of a good or service. Such fees are paid for the privilege of membership, and not for the purchase of a good or a service. In contrast, the payment of fees for locker rentals and other charges pertaining to the use of golf facilities and equipment involves the sale by the golf and country club of services to the availing member." — This is the Court's definitive formulation of the distinction that governs the scope of the 20% discount in membership clubs, directly resolving the issue.

• Carlos Superdrug Corp. vs. Department of Social Welfare and Development, 553 Phil. 120 (2007) — Cited by the RTC for the proposition that RA 9994 grants a 20% discount to senior citizens for the utilization of services in recreation centers and that the law is a legitimate exercise of police power.
• Southern Luzon Drug Corporation vs. Department of Social Welfare and Development, 809 Phil. 315 (2017) — Followed for the principle that recognizing all senior citizens as a group without distinction as to income is a valid classification, and that the Constitution afforded the elderly a blanket privilege without reservation as to income or other personal circumstances.
• Government Service Insurance System vs. De Leon, 649 Phil. 610 (2010) — Followed for the inflexible rule that social legislation must be liberally construed in favor of the beneficiaries, with all doubts resolved in favor of the retiree to achieve humanitarian purposes.
• Republic vs. Pryce Corporation, Inc., G.R. No. 243133, 16 March 2023 — Followed for the principle that a law cannot be amended by a mere regulation and that an administrative agency may not enlarge, alter, or restrict the provisions of the law it administers.
• Association of Non-Profit Clubs, Inc. vs. Bureau of Internal Revenue, G.R. No. 228539, 26 June 2019 — Followed and applied as controlling authority for the proposition that membership fees, assessment dues, and the like do not involve the sale of a good or service, applied by analogy to the 20% senior citizen discount under RA 9994.
• Commissioner of Internal Revenue vs. Federation of Golf Clubs of the Philippines, Inc., G.R. No. 226449, 28 July 2020 — Followed as a reiteration of the Association of Non-Profit Clubs ruling, confirming that recreational clubs are not selling any service when collecting membership fees from members.
• Philippines International Trading Corporation vs. Commission on Audit, 635 Phil. 447 (2010) — Followed for the principle of in pari materia: diverse statutes relating to the same thing should be taken together in construing any one of them, used to harmonize the treatment of membership dues under the Tax Code and RA 9994.
• Colmenar vs. Colmenar, G.R. No. 252467, 21 June 2021 — Cited for the distinction between questions of law and questions of fact, supporting the propriety of direct recourse to the Supreme Court under Rule 45.

• Section 4(a) and 4(a)(7), Republic Act No. 9994 (Expanded Senior Citizens Act of 2010) — Mandates a 20% discount and VAT exemption on the sale of enumerated goods and services from all establishments for the exclusive use and enjoyment of senior citizens, including "the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers." The Court held that the plain language requires a sale of a good or service for the discount to apply, and that the law contains no exemption for non-profit, stock golf and country clubs.
• Section 9, Republic Act No. 9994 — Grants the DSWD quasi-legislative or rule-making power to formulate and adopt amendments to existing implementing rules to carry out the objectives of RA 9994. The Court found that this authority does not extend to creating blanket exemptions not contemplated by the law.
• Paragraph 2, Section 4, Article 7, Rule IV, IRR of RA 9994 — Provides that non-profit, stock golf and country clubs not open to the general public are not mandated to give the 20% senior citizen discount. The Court declared this provision invalid for exceeding the scope of the DSWD's delegated authority.
• Section 105, 1997 National Internal Revenue Code — Specifies that VAT applies only to the "sale, barter or exchange of goods or properties, or sale of service." The Court relied on its interpretation of this provision in Association of Non-Profit Clubs to determine that membership dues do not involve a sale of service, applying the same reasoning to RA 9994 by virtue of in pari materia.

Gesmundo, C.J. (Chairperson), Hernando, and Zalameda, JJ., concurred. Rosario, J., was on leave.